3Com Reports Wider 2Q Loss, Job Cuts

For the quarter ended Nov. 28, the networking vendor reported a loss of $139 million, or 37 cents per share, compared to a loss of $68.5 million, or 19 cents per share, in the same quarter a year ago.

Revenue for the quarter dropped to $182 million, down from $272.2 million the same quarter last year.

3Com ended the quarter with 2,900 employees, down from 3,100 at the end of the previous quarter. The company plans to cut 900 employees during the rest of the fiscal year due to previously announced actions, such as manufacturing outsourcing, said Bruce Claflin, president and CEO of 3Com, Marlborough, Mass.

During the quarter, 3Com's joint venture with Chinese networking vendor Huawei Technologies became operational, a partnership aimed at rebuilding 3Com's high-end networking portfolio following a three-year absence from the enterprise market.

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3Com recorded a charge of some $13 million during the quarter related to its investment in the joint venture, while products from the partnership, including two new router families and a modular Layer 3 switch, contributed $5 million in revenue to the quarter.

The company also inked an OEM partnership with security vendor CrossBeam last month that brings new security products into 3Com's portfolio. The first product stemming from the partnership, the Security Switch 6200, hit the market earlier this week.

To support its expanding product portfolio, 3Com is recruiting new VARs, systems integrators and service providers capable of supporting more complex enterprise solutions, Claflin said.

3Com earlier this month revived its channel partnership with EDS, a relationship that dissolved after 3Com exited the enterprise market in 2000.

While 3Com saw double-digit sequential growth in overseas markets, revenue in the Americas, particularly in the U.S., were weaker, declining 11 percent sequentially.

In particular, sales of 3Com's IP telephony products slowed down in the U.S. during the quarter as customers await new product and feature rollouts, Claflin said.

Shares of 3Com Wednesday closed down 20 cents at $7.70 prior to the announcement.